Q. How will farmers be affected by the policy on FDI in
multi-brand retail trading?

Answer:

Farmers will receive better renumeration for their
produce. Indian farmers, at present, realize only one-third of the total
price paid by the final consumer.Farmers will get better prices
from the reduction in post-harvest losses (nearly 30% in the case of
fruits and vegetables), strengthening of the backend infrastructure and
direct purchase by the retailers. FDI in multi-brand retail trading will
result in the strengthening of the supply-chain infrastructure for all
products, ranging from storage to processing and manufacturing
infrastructure, which would reduce post-harvest losses. At least 50% of
the total foreign investment will be in the villages, which would
transform India through improved agro processing and cold-chains.

Q.How will medium and small industries be impacted by the
policy?

Answer:

30% sourcing from Indian small industries has been made
mandatory. Small manufacturers will benefit, as it would provide the
necessary scales for these entities to expand capacities in
manufacturing, create more employment and also strengthen the
manufacturing base of the country. They will derive the benefits of
improved productivity due to technology upgradation, resulting in
increased profitability and earnings. The sourcing condition will also
enable the small enterprises to get integrated with global retail
chains, thereby enhancing their capacity to export products from India.
New manufacturing opportunities will open for the nation’s micro, small
and medium enterprises.

Q.
Will this policy force small retailers to shut down?

Answer:

The
same argument was used against Indian organized retailers. However,
domestic organized retail already exists-such as ‘Big Bazaar’,
‘Shoppers Stop’, ‘Reliance Fresh’, ‘More’, ‘Big Apple’, ‘Spencers’,
‘Croma’ etc. It constitutes only about 4% of retail trade and
co-exists with the small ‘kirana’ stores and the unorganized retail
sector. There has been a strong competitive response from traditional
retail to these organized retailers, through improved business practices
and technology upgradation. As a result, the organized retail chains
have closed down in a number of locations, while others have reduced the
scale and spread of their operations. Global experience also indicates
that organized and unorganized retail co-exist and grow. Small retailers
would continue to be able to source high quality produce, at
significantly lower prices, from wholesale cash and carry points. In
countries such as China, Thailand, Indonesia, Brazil, Singapore,
Argentina and Chile, where there are no caps on FDI and where there are
no conditions, small retail stores have flourished, leading to more
employment. Hence, it is not correct to state that FDI in multi-brand
retail trade will force small retailers to shut down.

Q. How will the policy help the rural youth?

Answer:

FDI in multi-brand retail trading will create a large
number of employment opportunities, in villages spread across the
country, in the entire range of activities from the backend to the
frontend retail business, as also from the skills imparted to them by
the prospective investors.

Q. How will consumers benefit from the policy?

Answer:

Consumers stand to gain, firstly, from the lowering of
prices due to supply chain efficiencies and secondly, through
improvement in product quality, as a combined result of technological
upgradation; efficient grading, sorting and packaging; testing and
quality control and product standardization.

Q.
Will this policy affect the lower income sections of society adversely?

Answer:

Lowering of prices will arrest the erosion of real
incomes. With their existing incomes, the economically disadvantaged
sections will be able to buy more than before. On the other hand, as
supply-chain efficiencies are built up and producers get remunerative
prices, their purchasing power will also rise.

Q.Will the Indian market be flooded by Chinese
products as a result of this policy?

Answer:

India’s trade policy has safeguards to prevent the Indian market from
getting flooded by cheap Chinese goods.

The
30% sourcing condition will ensure that more manufacturing occurs in the
country for the retail stores. At present, no such condition has been
imposed on domestic organized or small retail.

Also, the safeguard of at least 50% investment being made in backend
infrastructure provides a powerful incentive for investors to use the
investments in the backend infrastructure to produce/source products
locally rather than import them, which would necessarily carry the
additional costs of tariffs, insurance and freight. Given this, it
would make very little economic sense for these retailers to go in for
large scale imports.

Q. Does the policy have any safeguards against predatory
pricing?

Answer:

A
strong legal framework in the form of the Competition Commission, which
covers all sectors, is available to deal with any anti-competitive
practices, including predatory pricing.

Further, the calibrated approach provided in this policy will ensure
limited presence of such entities which would make it difficult for them
to stifle competition.

Q.
Was adequate consultation carried out before the decision was taken?

Answer:

All
stakeholders were consulted. Government issued a discussion paper on
‘FDI in multi-brand retail trading’ in July, 2010, which was released in
the public domain. Around 175 responses were received which were also
put in the public domain. Government took the decision to permit FDI in
multi-brand retail trading on 24 November, 2011, which was held in
abeyance for broader stakeholder consultations. Thereafter, Government
carried out extensive consultations with stakeholders, including the
SMEs, food-processing industry, consumer associations and farmers’
associations. All State Governments were also addressed in this regard
and views expressed by them noted while finalizing the policy. Some
State Governments endorsed the policy, while others expressed certain
reservations. Some others conveyed that they were examining the matter.

Q.
Is
this policy mandatory for all States?

Answer:

The
FDI policy on multi-brand retail trading is an enabling framework. It
remains the prerogative of the states to adopt it or not.

The Constitution of India confers equal rights on all
States. A number of agrarian and fruit producing States have demanded
implementation of the policy. As such, the decision to implement and
benefit from the policy has been left to the States. The policy provides
that it would be the prerogative of each individual State Government to
decide whether and where a multi-brand retailer, with FDI, is permitted
to establish its sales outlets. No State can therefore prevent any other
State from adopting the policy.

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